Some housing bubble reports from Wall Street and Washington. "The big 'mortgage news event' of the week has to be the Tuesday release of OFHEO's long-awaited report on Fannie Mae's $10.8 billion accounting scandal. According to NMN’s Brian Collins, Treasury secretary John Snow told traders that limitations need to be placed on the size of Fannie and Freddie' Mac's portfolios, which have combined assets of $1.4 trillion."

"Could it be that the Treasury officials have some inside information about the OFHEO report, that it will embarrass Fannie and its supporters, clearing the way for the Senate to pass Sen. Richard Shelby's GSE bill?"

"Treasury undersecretary Quarles (mentioned above) warned debt security traders on Friday that any traders who establish unusually large positions in Treasuries can expect close scrutiny from regulators. 'Questionable trading behavior has consequences and can result in increased regulatory scrutiny and referrals to enforcement authorities,' he said. Investment banks, banks, GSEs and FHLBs all are large investors in Treasuries."

"Lowe's shares fell after the nation's second-largest home-improvement retailer made note of 'some weakness' in early May sales and the 'monetary pressures' of rising gas and interest rates on consumers."

"Rising interest rates and an easing housing market are starting to hurt home-improvement spending, said Nicolas Retsinas, of Harvard University. 'The consumer's had home-equity money and new homes to be involved with,' analyst Eric Bosshard said. 'As we see some moderation of that, it chokes off some of the fuel that's been driving spending for' Lowe's business."

"Slowing home sales and falling home prices led Banc of America Securities analyst Daniel Oppenheim to lower his profit expectations and price targets for home builders. 'Even a 'soft landing' would lead to significant earnings declines,' the analyst wrote."

"He noted that the builder stocks, which are off about 21% year to date, now reflect more of the likely earnings erosion. 'We estimate that companies with a significant inventory of land, high financial leverage, [and] a high proportion of land controlled via options rather than ownership are factors that lead to increased sensitivity to changes in home prices,' Oppenheim wrote."

"'We see greater risk of price declines in markets where affordability is stretched, given the limited buyer pool at current prices,' Oppenheim said. Affordability 'will worsen significantly if mortgage rates rise from current levels,' he said."